No Update for Medicare Advantage Plans, CMS Says

WASHINGTON -- The Centers for Medicare and Medicaid Services (CMS) has announced that private insurers who offer Medicare Advantage plans will see no payment updates next year.

The Medicare Advantage plans -- offered through the federal government's Medicare program but administered by private insurance companies -- were cut back drastically in the healthcare reform law. The law called for a flat payment update for the plans in 2011, and cuts starting in 2012.

The rule announced Monday makes good on the law and says that Medicare Advantage plans will be paid at the same rate as in 2010, rather than a previously-proposed payment update of more than 1%.

Medicare Advantage plans are paid between 9% and 13% more than traditional Medicare plans, according to recent report by the Medicare Payment Advisory Commission (MedPAC), which advises Congress.

In 2009, nearly one-quarter of Medicare beneficiaries were enrolled in an MA plan, according to the Kaiser Family Foundation. However, the quality of the plans varied widely, the MedPAC report said.

Also, the cost of the more expensive MA plans is paid for by those who aren't enrolled in MA plans, MedPAC said. Each dollar of enhanced benefits in the MA plans costs the Medicare program an average of $1.08 extra, the report said.

The insurance industry has defended the plans, saying that seniors in Medicare Advantage plans receive higher quality care than those enrolled in fee-for-service plans.

Insurers and many Republican were strongly opposed to cutting money from the plans to bring them in line with fee-for-service plans, arguing that seniors would be harmed by having their benefits limited.

The healthcare reform bill also mandates that Medicare Advantage plans must spend at least 85 cents on the dollar on medical care, or face stiff penalties.

The notice posted by CMS Monday also deals with rebates for Medicare Part D -- the government's drug prescription program.

Starting June 15, seniors who reach the so-called "doughnut hole" in Medicare Part D will receive a $250 check to help offset their out-of-pockets costs.

Currently, Medicare patients start paying 100% of their drug costs when their total prescription expenses exceed $2,700 each year. Coverage picks up again once costs reach $6,154, a limit that few seniors exceed. The gap -- almost $3,500 that Medicare recipients have to pay completely out-of-pocket each year -- is the doughnut hole.

The 2011 doughnut hole would kick in at $2,840 in outlays, and Medicare would pick up again at $6,300, according to the notice. However, by 2020, patients will have to pay only 25% of prescription costs, rather than 100%, when they're in the doughnut hole.

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